Two companies vie for Signal Mountain water system

Two companies vie for Signal Mountain water system

Water towers stand on James Boulevard on Signal Mountain Friday, December 4, 2015.

Photo by
Angela Lewis Foster
/Times Free Press.

For Signal Mountain to maintain its own water system, the town projects it will have to raise its water rates anywhere from 29.75 to 54.5 percent to add or repair pipes, pumps and storage tanks.

"As our system has grown and aged, our operation has not adjusted to these changes and we have to figure out how to get back on track," Town Manager Boyd Veal told the Signal Mountain Town Council last week.

Comparing the offers

Walden’s Ridge Utility District and Tennessee American Water have both made proposals to take over town of Signal Mountain’s water system:

Tennessee American WaterPurchase price: $3.4 millionCapital investment: $1.25 million in five yearsRates: Freeze for five yearsFuture increases: TPUC approval

In this April, 19, 2018, staff file photo, Valoria Armstrong, left, president of Tennessee American Water, and Kevin Kruchinski, director of operations, talk about a proposal to sell water to Signal Mountain at Tennessee American Water's administrative offices on Wiehl Street.

Veal and town commissioners are looking at a whole new track for water service on the mountain. The city is considering rival proposals to sell its water system to either a public water utility operated by its mountain neighbor or to a private water company owned by America's biggest water utility.

Tennessee American Water, which is already the wholesale water source for the town of Signal Mountain since 1925, and the Walden's Ridge Utility District, which already tests Signal Mountain's water and supplies hundreds of homes within the town, each have made offers to take over Signal Mountain's water system.

Both of the water utilities have offered to pay the town more than $3 million to acquire Signal's water system and its 3,500 customers, while making needed investments to upgrade Signal Mountain's pipes and keeping current water rates frozen for at least the next five years. But the terms of their purchase offers differ.

Tennessee American Water, the state's biggest privately owned water company, has offered to pay $3.4 million and invest at least $1.25 million over the next five years to upgrade the Signal Mountain water system while keeping rates constant.

As a private utility, Tennessee American also will pay property taxes to Signal Mountain and supply water from the region's most abundant source, the Tennessee River.

As part of the country's biggest water company, Tennessee American Water president Valoria Armstrong said Tennessee American also can buy equipment cheaper and provide more personnel and expertise than can Walden's Ridge Utility District, which has 10 employees.

"We've supplied water to Signal Mountain consistently and reliably for 93 years, and we believe we have the capability and capital strength to ensure quality water is delivered on the mountain," she said.

But Walden's Ridge Utility District, which switched from Tennessee American to the Hixson Utility District as its wholesale water source in 2015, wants the town of Signal Mountain to join the Walden utility for what it argues will be a better deal. Ron West, general manager for the Walden's Ridge Utility District, said the publicly owned utility doesn't have to pay shareholders or answer to Wall Street in setting its prices.

Walden's Ridge has offered $3.6 million to buy Signal Mountain's water system, or $200,000 more than Tennessee American, and has pledged to spend at least $2.6 million on system upgrades in the next five years, or more than twice what Tennessee American offered in its purchase proposal.

Utilities at a glance

Tennessee American WaterEstablished: 1887Parent company: Tennessee American WaterWater source: Tennessee River filtered by Tennessee American treatment plantsOffice and treatment plant: 109 Wiehl S., ChattanoogaGoverning board: Advisory local board and all water rates must be reviewed by the Tennessee Consumer Advocate and decided upon by the Tennessee Public Utilties Commission.

Sources: Company reports

"We think Signal Mountain would be better off joining with our system here on the mountain," West said. "We already supply water to many residents of the town [where Signal Mountain annexed land in the past] and we have an open, transparent process for making our decisions that will be made among the commissioners who live on Signal Mountain."

The town council, which will consider the fiscal 2018-2019 budget tonight during a specially called meeting at 7 p.m. at Signal Mountain City Hall, is also scheduled to consider tonight how it will proceed with a possible sale of the water system.

Last week, Mayor Chris Howley and a couple of other town council members all voiced support for selling the water system after a study of it by the engineering firm Arcadis suggested the city will need to invest an estimated $3.7 million to address chronic system leaks in the Hidden Brook and Carriage Hill subdivisions.

When I look at $3 million-$4 million of investment, I'm not sure ownership is what we need," Signal Mountain Vice Mayor Dick McGee said.

"I agree with your assessment," Councilman Robert Spalding said.

Last month, former council member Bill Lusk said in a letter to other council members that he "would prefer that we keep our system, because once it is gone it is likely gone for good."

"But if the Council elects to sell our system, my take is that WRUD (Walden's Ridge Utility District) would be the best choice for the Town and its water customers," Lusk said. "My opinion is based on WRUD's superior financial offer, their non-profit status, the lack of capital riders as imposed by TAWC (Tennessee American Water Co.), the quality and source of their ground water which requires much less treatment than surface water from the river, their history of rate stability, their local presence and their commitment to our employees."

Other council members said they need more time to consider the competing purchase offers.

The town council, which originally said it wanted to make a decision on the water system by the start of the next fiscal year on July 1, has other meetings scheduled on Monday, May 14 and on Friday, May 25.